ASIA STOCKS mostly lower on China concerns

Asian stocks were mostly lower Thursday, as a strong initial economic indicator for China failed to offset pessimism over its economy.

The initial October reading for China’s manufacturing activity came out at 50.9, compared to a final reading of 50.2 in September. The score was a seven-month high.

The preliminary reading was among the first economic data on the region’s largest economy in the third quarter, coming less than a week after figures showed that Chinese growth picked up from a dip in the second quarter.

Australia’s S&P/ASX 200 added 0.5%, South Korea’s Kospi shed some of its earlier weakness and traded flat.

Thursday’s upbeat reading, however, did little to offset fears over the Chinese economy, as China’s interbank lending rate moved higher for a second day, reviving fears of a liquidity crunch in June. In addition, data showing a further rise in house prices earlier in the week increased concerns that Beijing could step in to cool down the market.

Hong Kong’s Hang Seng index dropped 0.9% and the Shanghai Composite lost 0.2%.

Chinese banks recorded substantial losses in Hong Kong, with China Construction Bank down 1.5%, and Industrial & Commercial Bank of China down 1.3%

The yen remained strong, which weighed on Japanese stocks. The Nikkei Average fell 0.6%.

The dollar trading below ¥98 put some pressure on exporters in Tokyo: Kyocera Corp. lost 1.5%, and Toyota Motor Corp. was 1% lower.

There was also some weakness among companies that produce industrial machinery in Japan after Caterpillar shares plunged 6.1% overnight as the firm cut its full-year earnings forecast. This had a knock-on effect on its peers in Japan, where Hitachi Construction Machinery lost 2.7%, and Komatsu also dropped 3%.

Also in Japan, Hitachi jumped 7.7% after the company more than doubled its net profit outlook for the fiscal half-year ended Sept. 30, due to strength in areas such as electric-power systems.

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